Economy strains college plans

ELON, N.C. — Erin O'Connell took the tour last week at Elon University, a handsome, up-and-coming college with a $31,000-a-year price tag. That's hefty, but $20,000 less than some "uppity" schools she may have to cross off her list.

"I'm going to be pulling out my hair to make ends meet," said the high school senior from suburban Boston. "I'll apply for anything and everything I possibly can." As for more expensive schools, she said: "While the title would be nice, I might not get out with both arms and both legs."

It's prime college-visiting season for the high school class of 2009, which next fall will send the greatest number of graduates on to college in American history.

But the souring economy and the crisis on Wall Street are shrinking families' college savings, and some parents wonder whether they will be able to afford tuition at the schools their youngsters are looking at.

Around the country, students deciding where to apply may have to scale back their dreams. Some private schools worry that they could lose business to public universities. Already, federal loan applications are up, and some schools are seeing more aid inquiries.

Most students won't decide on their college plans for months. But a recent survey of 2,500 users of the Web site meritaid.com found that 57 percent of students were considering a less prestigious school for money reasons.

Because of plummeting housing prices, many families no longer can count on the equity in their homes to help them pay for tuition.

Meanwhile, 529 college savings plans have been hit hard in the stock market.

A year ago they held a combined $110 billion. Preliminary figures from Financial Research Corp. show the value of 529s declined 9 percent last quarter even with new money coming in, and that was before last week's slump on Wall Street.

Some parents are hoping to secure financial aid, something they previously assumed they didn't need or couldn't get.

"We haven't qualified before. We might now," said Betty Morris of West Chester, Pa., who was touring Elon this week with her son Jack.

The good news for such families is that the college financial aid system is in many ways tilted toward higher-income families, thanks to tuition tax breaks and financial aid that is based on merit, not need. At Elon, for instance, about 40 percent of the 5,000 students get merit aid.